Tuesday, June 28, 2016

This past weekend, I checked Where's My Refund and learned that the IRS had revised our 2015 tax return and reduced our refund by about 10%. The IRS would be sending me a notice this week with the details. Per usual protocol, the IRS offered two options: accept the adjustment and do nothing or dispute the adjustment if I didn't agree. Many people I know just accept the adjustment rather than deal with the IRS. I, on the other hand, assume I will dispute the change since based on experience as a tax preparer, I have found the IRS is incorrect (at least partially) about 80-90% of the time.

Here is my approach to dealing with an IRS notice.

Understand the exact reason for the adjustment. Fortunately, Where's My Refund provided the details of why my return was changed. It specified that an incorrect number had been transferred from Schedule D to Form 1040.

Check a copy of the return. Since I do our return by hand, I always make a copy to keep for reference. Upon inspecting my return, I notice that I forgot to put parentheses around a negative total. So the IRS calculated the total as positive, even though a math check would have shown the value was negative.

Call the IRS early in the day. On Monday morning, at 7:05 AM, I called the IRS and was connected to a representative in less than 5 minutes. I tried calling back at 7:45 AM and was disconnected due to "unusually high call volume" and instructed to call back at another time.

Determine what needs to be done to correct the error. Since the only error was a missing negative sign, the adjustment was categorized as a "math error" and could be corrected over the phone. The representative agreed with my explanation of the missing negative sign and recalculated the results, which matched my original return. So the error was corrected, and my original refund was reinstated. If needed, I was ready to file an amended return, but that wasn't necessary.

Granted, I have several years of experience working with the IRS, which makes the interaction less daunting. For example, most people I know would rather stick a pin in their eye than interact with the IRS. However, I have found that the IRS is usually very good at arriving at the same position I have once all the relevant facts have been presented to them.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Sunday, June 26, 2016

My cynical conspiracy theory is that the Fed won't be raising rates for the next five to ten years, but they can't let us know. Otherwise, asset prices will increase significantly and create numerous financial bubbles. So the Fed will officially keep talking about raising rates, but use every negative event to delay delivering an actual increase.

The Brexit vote is exactly the public reason the Fed needed to avoid raising rate in the near term, and even, for the next two years. In the meantime, the Fed will keep jawboning about being data dependent and keeping an imminent rate increase in front of investors.

Ben Bernanke was right that interest rates won't be increasing during his lifetime.

Saturday, June 25, 2016

To me, this may be the beginning of the end for the political elite who have be ramming their view of the world on the masses in their respective countries, while personally benefiting financially. Obama, Clinton, and even Sanders are part of that political elite. So are Ryan, McConnell, Pelosi and Reid. It seems to me, none of them have worked in a real job to know what it's like for most of us.

I like the idea of a referendum and the government leadership resigning if the voters do not support the leadership's point of view. Perhaps, the U.S. would benefit from a few referendums; gun control, immigration, etc.

Unfortunately, I doubt any of the U.S. political elite would resign if a referendum went against their policy positions.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial or political advice. Please consult a professional advisor.

Friday, June 24, 2016

Will the unexpected Brexit lead to a financial crisis of 2008 magnitude? While I wasn't concerned yesterday, the unfolding of events today have caused me to revise my thinking. Not unlike 2008, there has been a lot of complacency in the market, despite ominous signs of potential issues and then a critical event which led to an unstoppable downfall of the market.

At this point, the Brexit vote may be that critical event in 2016. The next few weeks will be telling. For now, I will be maintaining our current investment holdings,which is, unfortunately, what I also did in 2008. However, during that time, I will be evaluating whether to increase our investments in equities or to sell some positions in our trading account to lock in profits.

For more on Reaping the Rewards, check back Fridays for a new segment.

Monday, June 20, 2016

Part of my strategy for creating steady sources of income in retirement is to own rental property. My goal is for rental income to cover 25% of our retirement income. At this time, I have met that goal through a partnership interest in a industrial building that I inherited from my parents. This investment has worked out well since the real estate has a property manager and requires no direct involvement from me.

Given the return of this property is 10%, I've been considering increasing our rental real estate holdings through buying 2-3 family homes for rent. However, after a few months of searching, I have not found a property financially comparable to the property I already own. The main reason is that most properties are priced to deliver at a low return of 4-6% that is only slightly higher than the return of some good dividend paying stocks. Also,being the sole landlord would require high involvement on my part.

Low return and high involvement isn't what I want to sign up for in retirement. Also, I recognize that, eventually, any individually owned property will need to be sold to access cash, which can also be challenging.

So for now, I plan to only buy a rental property if the return is high (greater than 8%) and if low involvement is required from me. A pretty high bar, which very few properties will meet. However, I plan to keep looking just in case one become available for purchase.

For more on Strategies and Plans, check back every Monday for a new segment.

Sunday, June 19, 2016

I'm a very lucky dad. I have two great kids and a great wife. Ever the late bloomer, I became a dad late in life. I'm so very glad I did.

My dad, who passed away 10 year ago, would have been 90 this year. I always thought he would be there. And then suddenly, one day he was gone. I still miss him very much and remember everything he did for me and the great times we had together.

Hopefully, my kids will have similar great memories with me.

For more on New Beginnings, check backs Sunday for a new segment.

This is not financial or parenting advice. Please consult a professional advisor.

Saturday, June 18, 2016

In retrospect, many of my successes have been the result of being in the right place at the right time for my particular set of strengths. Recognizing this, it's important for me not to mistake this success due to chance with success due to superior skills.

The difference to me is the following. Success by chance is not consistently reproducible. Success by skill can be reproduced, even under different or challenging circumstances.

Recently, our investments in the stock market have been doing very well. Several of our personal accounts have reached all time highs, despite the market indices not exceeding previous highs. Our success has been due primarily to buying beaten down oil and material stocks over the past year. Clearly a case of being in the right place at the right time.

In 2014, I picked in a stock that went up 10X in a little under two years. It was a biotech stock and again it was right place at the right time.

If it were superior skill, I would be able to replicate these results. However, historically, I haven't been able to do so. So I don't make the mistake of take more risk because I erroneously believe that I have superior skill.

For more on Reflections and Musings, check back every Saturday for a new segment.

About Me

My wealth goal is to create a guaranteed yearly income stream equal to my highest salary for my retirement years. While I have developed a strategy to do this,
I am interested how others are thinking of achieving financial security for retirement.
This blog is a summary of facts, ideas, discussions, and action plans to achieve that goal.

Disclaimer

This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.

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Disclaimer:
This is a personal blog about my thoughts, experiences and ideas on building wealth. The contents of this blog are for informational purposes only. No content should be construed as financial advice. Commenters, advertisers and linked sites are entirely responsible for their own content and do not represent the views of My Wealth Builder. All financial decisions involve risks and results are not guaranteed. Always do your own research, due diligence and consult your own professional advisor before making any decision. My Wealth Builder assumes no liability with regard to financial results
based on use of information from this blog.

If this blog contains any errors, misrepresentations, or omissions, please contact me or leave a comment to have the content corrected.